Will Q2 Earnings Hold a Surprise for Visa (V) Stock?

Last quarter, Visa surpassed the Zacks Consensus Estimate by 10.26%. Let’s see how things are shaping up for this announcement.

Q2 Flash Back

We expect the top line to benefit from the inclusion of USAA and Costco which will drive volume growth. On the last earnings call, management noted that USAA was an important driver of U.S. net revenue growth. Also, higher payments volume from Visa Europe will be another contributing factor to revenue growth.

The company’s Service Revenue is likely to increase driven by higher global U.S. debit as well as credit card payment volumes.

Also, growth in processed transaction is likely to push up Data Processing fees.

Moreover, we expect an increase in cross border volume growth driven by a weak euro and British pound, which is attracting travel to those markets. This will result in higher International Transaction fees.

Results will also likely show an increase in incentives, with the increase being driven by the European business and new clients, Costco, USAA and other large client renewals.

We also expect to see higher operating expense due to a shift in marketing and tech spending to the fiscal second quarter from the fiscal first quarter. Also, Visa Europe integration cost will add to the overall expense increase.

Forex headwinds weakened revenues by 3% in the last reported quarter, and this headwind is expected to persist.

The company’s elevated share buyback spending plans, mainly to offset earnings dilution from the Visa Europe deal, will help its bottom line.

Earnings Whispers

Our proven model does not conclusively show that Visa is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Visa has an Earning ESP of 0.00%. This is because the Most Accurate estimate stands at 79 cents per share, is in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Discover Financial Services DFS has an Earnings ESP of +2.10% and a Zacks Rank #3. The company is expected to report first-quarter earnings results on Apr 25.

Moody’s Corporation MCO has an Earnings ESP of +4.17% and a Zacks Rank #2. The company is expected to report first-quarter earnings results on May 5.

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